GLOBAL MARKETS-Stocks sluggish amid North Korea nerves, euro weakens

* Oil prices fall from 26-month high on profit-taking (Updates with open of U.S. markets; changes dateline from London)

By Lewis Krauskopf

NEW YORK, Sept 26 (Reuters) - World stocks fell on Tuesday and the euro dropped to its lowest level in about a month as investors pulled back from trades that have worked for most of 2017 in the face of continued political uncertainty around the globe.

North Korea has boosted defences on its east coast, a South Korean lawmaker said, after the North said U.S. President Donald Trump had declared war.

The latest U.S.-North Korea development came as market participants were still reckoning with the German election, in which Chancellor Angela Merkel won a fourth term but her party was weakened by a surge in far-right support.

“The market has really been reacting to a combination of the North Korea news and its global impact and the election in Germany,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey. “This has been a low-volatility market and this is really the only significant news we have had lately.”

The Dow Jones Industrial Average rose 13.17 points, or 0.06 percent, to 22,309.26, the S&P 500 gained 1.56 points, or 0.06 percent, to 2,498.22 and the Nasdaq Composite added 4.52 points, or 0.07 percent, to 6,375.12.

The tech sector edged up 0.3 percent after its worst day in five weeks.

The pan-European FTSEurofirst 300 index lost 0.05 percent and MSCI’s gauge of stocks across the globe shed 0.33 percent.

The euro fell as worry grew about political fallout in Germany and other euro zone countries.

Investors have shifted their focus to the euro zone’s growing political divides in places such as Spain and Italy after the German election, said Joseph Trevisani, Chief Market Strategist at WorldWide Markets in Woodcliff Lake, New Jersey.

“The European problems are structural and political and deep,” Trevisani said.

The euro was down 0.65 percent to $1.1769.

The dollar index, which measures the greenback against a basket of currencies, rose 0.57 percent.

U.S. Treasury yields rose ahead of a speech by Federal Reserve Chair Janet Yellen and a $26 billion sale of two-year notes. Yellen was due to speak at 12:45 p.m. (1645 GMT).

Benchmark 10-year notes last fell 6/32 in price to yield 2.2392 percent, from 2.22 percent late on Monday.

Brent oil prices fell after investors took profit following a rally to 26-month highs spurred largely by threats from Turkey to cut crude exports from Iraq’s Kurdistan region.

U.S. crude fell 0.82 percent to $51.79 per barrel and Brent was last at $57.70, down 1.25 percent on the day.

Spot gold dropped 0.7 percent to $1,300.49 an ounce.

Additional by Dion Rabouin in New York, Marc Jones in London;
Editing by John Stonestreet and Nick Zieminski